Supermarkets boost construction sector

Both New World and Countdown compete for the consumer's dollar. Photo / Janna Dixon

Supermarket expansion plans put the sector ahead of any other in development and construction work.

While commercial construction and infrastructure work has slowed down considerably, plans have emerged for 39 new or replacement supermarket buildings.

A spending programme has been put in train by Progressive Enterprises for 21 new or replacement stores and 18 by Foodstuffs.

With average store spends at $15 million, the 39 could be worth at least $585 million in construction alone.

In the next six to seven years, Australia's Woolworths, which owns Progressive, wants to trump locally owned co-operative Foodstuffs and have 30 to 60 more big-format shops than its rival.

"The only way to grow in this business is to steal trade off Foodstuffs. You can only do so much through branding but the rest comes from moving into enemy territory," said one industry expert.

Those programmes make the chains the country's big real estate developers, buying sites where they see the most potential and where they can drive a bargain, taking advantage of a depressed real estate market delivering a wealth of distressed vendors.

Luke Schepen, Progressive's national communications and public affairs manager, said the 18 new or replacement stores planned now would not be the end of it.

"Our property development team are continuously looking for opportunities for growth across the country."

In the past few months, Progressive has bought a number of parcels of land from receivers or forced sellers. For example, its $17 million swoop on Ponsonby's Soho site delivered it a prize after the Kells' business foundered.

Related Content

Progressive paid about $40 million for an empty site between Westfield Albany and the Northern Motorway, once owned by Albany developer Rick Martin.

Albany gives Progressive its entree into the growing area where Foodstuffs had a dream solo run for years, operating the smaller-format luxury-item New World inside the Lowy's mall near the big-format, carpark-fronted lower-priced Pak'nSave to the west.

From Albany to Beachlands, Progressive has sought resource consents, battling in the Environment Court, letting tenders and then engaging contractors to lay 4000sq m concrete floorpads and asphalt for hundreds of carparks and build stores for an average $15 million each.

More Property

Its rival is equally ambitious. Steve Anderson, Foodstuffs New Zealand's managing director, said the co-operative has 14 new supermarket developments under way.

"Not all stores are completely new to their community. A number of supermarkets such as New World Opotiki and Coopers Beach Four Square are replacement stores for older properties. In the South Island some stores had to be demolished following the Canterbury earthquakes at Kaiapoi, St Martins, Redcliffs, therefore the new stores are rebuilds of existing stores," Anderson said.

"Across the business Foodstuffs has a number of refurbishments and expansions under way. An example of these include Pak'nSave Mt Albert and Wairau, New World Windsor and New World Porirua.

"Throughout the country Foodstuffs has a variety of ongoing projects which are at various stages of development including site acquisition and resource consenting.

"We prefer not to speculate on these projects until agreement has been reached and approval to build has been announced."

Progressive has 159 company-owned stores and Foodstuffs about 170 but one senior manager claims the Foodstuffs' co-operative model is a drawback nobbling its growth.

"Rich owner-operators of New Worlds and Pak'nSaves go off and buy islands, planes, luxury holiday homes and spend more time out of their stores than in them. The last thing they want is a big capital spending programme by the co-operative," an industry expert said. "Franchisees will make $1 million to $6 million a year and they like to have a great lifestyle."

Over the past six months, Foodstuffs broke tradition by selling some of its portfolio to raise capital, whereas Progressive develops a new supermarket, sells it once it is finished, rents it back and recycles all capital into further new builds.

The business models are very different.

Construction of the $100 million Albany Countdown will start next year. Progressive is spending $60 million building but with a more ambitious $200 million plan for its land, planning apartments and smaller-format shops on the big site. Initial earthworks are already completed.

Speculation that Progressive could fill in part of Ponsonby's Soho site, scaling back Layne Kells' $250 million plans hatched towards the end of the last property boom could not be confirmed. Plans could top $50 million.

Progressive's run is not always smooth and it struck community and rival opposition at Beachlands.

At Warkworth, work is about to start on a contentious new-generation Countdown. A new Countdown and retail centre has been built at Takanini while at Stoddard Rd in Sandringham a $20 million store is planned.

A $16 million store in St John's has been delayed by appeals but a redevelopment at Orewa is being planned with a new development of a Lincoln Rd store in West Auckland opposite a Pak'nSave.

A new Countdown for Hobsonville, between the motorway and Hobsonville Rd, is planned, as is a new Waiheke Island Countdown.

New or replacement stores: New World Metro - the first supermarket in Auckland's CBD on Queen Street - Pak'nSaves at Papakura, Silverdale and Blenheim; Four Square Coopers Beach; New Worlds at Opotiki, Churton Park, Kapiti, Newlands, Tawa, St Martins, Redcliffs, Ilam and Kaiapoi. Refurbishment/expansion: Pak'nSave Mt Albert and Wairau and New World Windsor and Porirua.